Providence Resources - Annual Results for the year ended 31 December 2021
30/06/2022 07:00
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RNS Number : 6924Q Providence Resources PLC 30 June 2022
Annual Results
Dublin and London - 30(th) June 2022
Providence Resources P.l.c (PVR), the Irish based energy company, is pleased
to announce the publication of its annual report and accounts for the year
ended 31(st) December 2021.
James Menton, Executive Chair, Providence Resources, said:
"Successful optimisation of the Barryroe Field presents a unique opportunity
to develop a critically important indigenous source of oil and gas, to
substitute part of the imports that will be needed to meet ongoing demand
during the energy transition. The Barryroe Field has the potential to create
significant employment opportunities and provide strategic and fiscal value to
the Irish economy, at no cost to the Irish taxpayer.
The key barrier to progressing the project is the delay in Ministerial consent
for the Lease Undertaking, to permit us to drill an appraisal well next year.
Once we have the results of this appraisal well, we are confident that our
development plans can be progressed rapidly and Barryroe can have a
significant impact on Ireland's security of energy supply over the next two
decades. It's an opportunity we cannot afford to squander as, in any scenario
to 2050, there is still some level of demand for oil and gas through the
duration of the energy transition to Net Zero.
2021 OPERATIONAL AND FINANCIAL HIGHLIGHTS
Operational
· Barryroe, North Celtic Sea (SEL 1/11)
o The exclusivity deal with SpotOn Energy was terminated in April 2021,
o The new Board undertook a strategic review of the Barryroe field,
o The K Site survey took place in Q3 2021 and was completed on time and under
budget,
o In December 2021, the Board announced its preliminary outcome of the
strategic review.
Financial
· Operating loss for the period of €2.369 million versus €2.440
million in 2020,
· Profit for the year €3.442 million versus loss of €10.358 million
in 2020. The profit figure for the year was impacted by the fair value gain in
warrants of €5.643m (2020: €7.581m loss),
· Basic profit per share of 0.36 cents versus loss of 1.31 cents in
2020,
· Diluted profit per share of 0.30 cents versus loss of 0.91 in 2020,
· At 31 December 2021, total cash and cash equivalents were €1.923
million versus €2.110 million in 2020,
· The Company has no bank or bond debt as at 31 December 2021,
· As part of the fundraising in May 2020, the company issued one share,
one £0.03 warrant and one £0.09 warrant. There were 86,061,529 of the £0.03
warrants exercised in 2021 raising c. €2.9m. The remaining £0.03 warrants
expired on the 6 May 2021. No £0.09 warrants were exercised and they expired
on the 6 May 2022.
2021 IN REVIEW
Board Changes
During 2021, there were a number of changes at Board level. The Chairman, Pat
Plunkett, resigned his position in July, at which time James Menton was
appointed Chairman. Ann-Marie O'Sullivan and Peter Newman joined the Board in
July 2021, bringing a wealth of industry and strategic communications
experience to the Board. In October, Alan Linn resigned from his position as
Chief Executive and, pending the recruitment of a successor, James Menton
temporarily took on executive responsibilities.
Strategy
Since its formation in July 2021, the new Board has adopted a realistic and
pragmatic approach to the formulation of its Barryroe Strategy. The Board has
given careful regard to the dynamics of the current regulatory environment and
the energy transition issues of security of supply, growing energy demand and
the continuing need to attract foreign direct investment as Ireland moves
towards carbon neutrality by 2050. From early August 2021, the Board
immediately reassessed its key objectives and priorities. The initial and
continuing priorities are as follows:
· Follow-up and engagement with the GeoScience Regulation Office (GSRO)
in relation to the application for the Lease Undertaking.
· Ensuring that the Company has the breadth and depth of experience,
competency and skills within the technical team to support the Board in the
formulation and delivery of the Barryroe Strategy.
· Enhancing the understanding of the Barryroe Project and the
opportunities it presents for shareholders and all other key stakeholders.
The Barryroe Lease Undertaking - Status
The granting of the Barryroe Lease Undertaking by Minister Eamon Ryan is
fundamental to the execution of the Board's strategy. Securing the Lease
Undertaking has been, and continues to be, the Board's main focus.
Since August 2021, the Board has engaged proactively with the GeoScience
Regulation Office (GSRO) and has written on a number of occasions to Minister
Eamon Ryan, asking him to grant the Lease Undertaking as a matter of urgency.
The Board has also engaged with a number of other key stakeholders, including
public representatives, in order to move the DECC/GSRO review process forward.
Despite a number of attempts to engage directly with Minister Ryan and other
members of the Government, a decision on the Lease Undertaking is still
outstanding.
In the Board's view, there is no justification for this ongoing delay, as it
believes that all required technical and financial information in relation to
the Barryroe Lease Undertaking has been submitted to the GSRO. The Board
believes that Minister Ryan's delay in progressing the application represents
a clear missed opportunity to help to ensure Ireland's energy security. The
Board is confident that the Barryroe Field offers a highly valuable resource
that, at no cost to the State, could contribute to:
· Ireland's energy security over the next decade.
· Ireland's energy transition to a carbon neutral economy.
· carbon reduction through import substitution.
· significant job creation and tax contributions.
Irish Government Policy and Barryroe
In September 2019, the Irish Government affirmed that all existing licences,
which included Barryroe, would be allowed to run their full term. It should be
firmly understood that Barryroe is a discovered oil and gas field, not a
wildcat prospect, in relatively shallow waters not far off the coast of Cork.
It requires an appraisal well to be drilled to confirm the reservoir and
hydrocarbon characteristics before a phased development can be initiated. That
well can be progressed only once the Lease Undertaking is issued. It is our
view that the potential offered by the successful exploitation of the Barryroe
Field would be an important element in the execution of Government policy, as
enunciated by the Department of the Environment, Climate and Communications'
"Policy Statement on Security of Electricity Supply" (November 2021) and
Section 3.7 of the "National Risk Assessment 2021/2022 - Overview of Strategic
Risk".
As a bloc, the EU is desperately scrambling for options to move away from its
dependence on Russian oil and gas and maintain future energy security. In
Ireland, we don't need to go through the process of locating further oil and
gas fields that the UK and Norway are now planning to undertake. We already
have a discovery in Barryroe, however, until the Minister approves the Lease
Undertaking, our near-term energy security is substantially in the hands of
other countries.
Current Government policy does not restrict Ireland's use of hydrocarbon
fuels; it merely precludes new searches for more of them in our own waters.
The Board believe that the Irish Government's delay in allowing progress on
its existing oil and gas licences, given the current energy security
pressures, adds unnecessarily to the risk of energy shortages.
The Case for Barryroe
Geopolitical Challenges
The war in Ukraine has re-emphasised the value of national self-sufficiency
across the whole range of primary energy sources. As Ireland moves towards a
much bigger share of renewable sources through the transition to 2050, there
will be an ongoing, albeit diminishing, level of residual demand for oil and
gas to meet Ireland's energy consumption needs. The impact of rising imported
energy prices and the growing potential for significant interruption to
imported energy supplies is currently a key focus for all Governments
throughout Europe.
Energy Security and Vulnerability
The Economic and Social Research Institute (ESRI) recently ranked Ireland as
the fourth-most energy insecure country in Europe. Currently, Ireland imports
70% of its gas needs through two interconnectors running from Scotland to
Ireland. The remaining 30% comes from the Corrib Field, which will be depleted
by the end of the decade.
Ireland's reliance on the UK for our energy needs puts the country in an
extremely vulnerable position and is totally unsustainable. Following Brexit,
Ireland is no longer compliant with the EU's requirements for energy security
according to the Commission for Regulation of Utilities (CRU). Ireland's gas
import infrastructure currently runs through a "third country", and there is
no legal obligation on the UK to consider Ireland's energy needs in the event
of significant disruption. The irony is that Ireland has a unique opportunity
to harness its own supply of oil and gas by optimising the Barryroe Field. Not
to do so would, in the Board's view, have a detrimental impact on Ireland's
energy transition and would represent a very significant missed opportunity
from a strategic, fiscal and energy security perspective.
Energy Transition - The Need for Barryroe
Ireland has a clear goal of being carbon neutral by 2050 and we acknowledge
that expanding renewable sources of energy must be the main focus in the years
ahead. However, most of our transport options, including cars, vans and
airplanes, run on oil and transitioning completely away from oil will not
happen
overnight. In reality, Ireland's commitment to achieving net-zero carbon
emissions by 2050 cannot be achieved without realistic transition planning.
Successful exploitation of the Barryroe Field, in conjunction with industry
and government, can contribute significantly to meeting Ireland's energy
demand during the transition over the coming decades without prejudicing
achievement of a carbon neutral economy in Ireland.
Environmental Benefits - Carbon Reduction Through Import Substitution
The benefits of indigenous sources of energy are significant. For example, gas
produced in Ireland and in Europe results in up to 30% less carbon emissions
than gas from outside Europe. This is due to a combination of more efficient
production technologies and less energy expended due to shorter pipeline
transport (given that long distance pipeline transport requires pumping
booster stations).
Technical Strategy
The Board recognised the need to engage a team of experts to lead on the
development of a technical strategy. In the wake of the failed "SpotOn" farm
out, and the resumption of the Company's direct management of the Barryroe
project, the Board evaluated Providence Resources' technical approach and
expertise. The Board appointed NRG Well Management International Ltd (NRG) to
lead the recruitment and organisation of an expanded technical team. The team
completed four major studies to underpin the technical strategy, in particular
an updated Competent Persons Report (CPR), commissioned from RPS Energy
Consultants (RPS), which was completed at the beginning of February 2022.
The new report confirms 81.2 MMstb of Gross 2C oil resources that can be
accessed through an initial two-phase development project, addressing one
reservoir in the central segments of the Field only, those closest to the 2012
oil discovery well. The CPR, which remains consistent with the 2013 whole
field assessment, confirmed a Net Present Value (NPV) of $401m to Providence
Resources' interest in this initial project only, based on a 10% discount
factor and a $70 Brent oil price. The phased project is
predicated on an initial appraisal well to confirm the reservoir and
hydrocarbon phase characteristics in the key Basal Wealden A Sands. The
initial project is also anticipated to advance the potential for further
development of other Barryroe reservoirs, including those holding its
discovered gas resources.
The technical strategy for the Barryroe Field is ready to be implemented
within a short timeframe. Subject to Ministerial consent for the Lease
Undertaking, the Board has decided to proceed with an appraisal well in 2023.
In expectation of a satisfactory outcome, the Board intends to proceed to a
phased development leading to first production in 2026. The Company urgently
requires a positive decision on the Lease Undertaking by Minister Eamon Ryan
in order to ensure that the Barryroe Field can play a key role in Ireland's
energy future.
Share Placing - June 2022
In June 2022, the Company raised gross proceeds of $1.8 million (equivalent to
approximately STG£1.5 million) through the subscription for 45,312,316
Placing Securities and 51,686,693 Subscription Securities (each of which shall
comprise one New Ordinary Share and one STG1.5p Warrant). The allotment and
issue of the Warrants is subject to and conditional upon the passing of
certain resolutions in relation to the Warrants at the AGM by the requisite
number of shareholders as required pursuant to the Companies Act. Together
with existing resources, this additional funding is sufficient to meet the
anticipated working capital requirements of the Group for at least the next 12
months.
Name Change - Barryroe Offshore Energy
The Company is proposing to change its name to Barryroe Offshore Energy, which
will be subject to a shareholder's resolution at the AGM. The new name
reflects the Board's ongoing and continuing focus on the Barryroe Field, as we
look forward to a positive outcome from the appraisal campaign.
The Future
The Board is keenly aware of the global climate crisis, which has been
exacerbated by an energy crisis as a result of the war in Ukraine. The impact
of rising energy prices, and the potential for significant interruption to
energy supplies, is a focus for governments throughout Europe. The challenges
we face are stark and any disruption to energy supplies will lead to
catastrophic economic and social impacts. The prospect of rolling blackouts
and/or energy rationing would also threaten Ireland's ability to attract
ongoing foreign direct investment.
It is a strategic imperative that Irish Government policy allows for a balance
between ideology and pragmatism with regard to energy policy. Ireland is now
at a critical juncture in planning for its energy future and all agree that we
will continue to require oil and gas to supplement available renewable sources
for decades to come.
Annual Report and 2022 Annual General Meeting
The Company's Annual Report and Accounts for the year ended 31(st) December
2021 will be posted later today to shareholders, together with the notice of
the 2022 Annual General Meeting. These will also be available on the Company's
website: www.providenceresources.com (http://www.providenceresources.com)
Investor Enquiries:
o Providence Resources P.l.c. Tel: 353 1
219 4074
James Menton
Executive Chair
Investor
Relations
Tel: 353 87 6620234
Job Langbroek
o J & E Davy
Tel: 353 1 679 6363
Anthony Farrell
Media Enquiries:
o AM O'Sullivan PR
Tel: 353 87 9881890 / tina@amosullivanpr.ie
Tina Quinn
PROVIDENCE RESOURCES Plc
Condensed consolidated income statement
for the year ended 31(st) December 2021
Notes
Year ended 31 December 2021 Year ended 31 December 2020
Audited Audited
€'000 €'000
Continuing operations
Administration expenses 2 (2,369) (2,163)
Pre-licence expenditure - (5)
Impairment of exploration and evaluation assets - (272)
Operating loss 1 (2,369) (2,440)
Finance income 3 6,699 361
Finance expense 4 (888) (8,279)
Profit/(loss) before income tax 3,442 (10,358)
Income tax expense - -
Profit/(loss) for the financial year 3,442 (10,358)
Profit/(loss) per share (cent)
Basic profit/(loss) per share 8 0.36 (1.31)
Profit/(loss) per share (cent)
Diluted profit/(loss) per share 8 0.30 (0.91)
The total profit/(loss) for the year is entirely attributable to equity
holders of the Company.
PROVIDENCE RESOURCES Plc
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2021
Notes Year ended 31 December 2021 Year ended 31 December 2020
Audited Audited
€'000 €'000
Profit/(loss) for the financial year 3,442 (10,358)
Other comprehensive income
Items that may be reclassified into profit and loss:
Foreign exchange translation gains/(losses) 4 4,982 (5,453)
Total comprehensive income/(expense) for the year 8,424 (15,811)
The total comprehensive income/(expense) for the year is entirely attributable
to equity holders of the Company.
PROVIDENCE RESOURCES Plc
Condensed consolidated statement of financial position
as at 31 December 2021
Notes 31 December 2021 31 December 2020
Audited Audited
€'000 €'000
Assets
Exploration and evaluation assets 5 66,983 60,425
Property, plant and equipment 1 13
Total non-current assets 66,984 60,438
_______ _______
Trade and other receivables 388 223
Cash and cash equivalents 1,923 2,110
Total current assets 2,311 2,333
_______ _______
Total assets 69,295 62,771
Equity
Share capital 6 71,829 71,743
Share premium 6 260,272 256,773
Undenominated capital 623 623
Foreign currency translation reserve 9,616 4,634
Share based payment reserve 767 806
Accumulated losses (281,370) (285,189)
Total equity attributable to equity holders of the Group 61,737 49,390
Liabilities
Decommissioning provision 7 6,056 5,853
Warrant liabilities 9 - 3,555
Total non-current liabilities 6,056 9,408
Trade and other payables 1,042 815
Warrant liabilities 9 460 3,158
Total current liabilities 1,502 3,973
Total liabilities 7,558 13,381
Total equity and liabilities 69,295 62,771
PROVIDENCE RESOURCES Plc
Condensed consolidated statement of changes in Equity
for the year ended 31 December 2021
Share Capital €'000 Undenominated Capital €'000 Share Premium €'000 Foreign Currency Translation Reserve €'000 Share Based Payment Reserve €'000 Accumulated losses €'000 Total €'000
At 1 January 2020 71,512 623 251,300 10,087 642 (274,898) 59,266
Total comprehensive expense
Loss for financial year - - - - - (10,358) (10,358)
Foreign currency translation - - - (5,453) - - (5,453)
Total comprehensive expense - - - (5,453) - (10,358) (15,811)
Transactions with owners, recorded directly in equity
Share based payments expense - - - - 448 - 448
Share options lapsed in year - - - - (284) 284 -
Shares issued in year 231 - 5,473 - - (217) 5,487
Total transactions with owners, recorded directly in equity 231 - 5,473 - 164 67 5,935
At 31 December 2020 71,743 623 256,773 4,634 806 (285,189) 49,390
At 1 January 2021 71,743 623 256,773 4,634 806 (285,189) 49,390
Total comprehensive income
Profit for financial year - - - - - 3,442 3,442
Foreign currency translation - - - 4,982 - - 4,982
Total comprehensive income - - - 4,982 - 3,442 8,424
Transactions with owners, recorded directly in equity
Share based payments expense - - - - 338 - 338
Share options lapsed in year - - - - (377) 377 -
Shares issued in year 86 - 3,499 - - - 3,585
Total transactions with owners, recorded directly in equity 86 - 3,499 - (39) 377 3,923
At 31 December 2021 71,829 623 260,272 9,616 767 (281,370) 61,737
PROVIDENCE RESOURCES Plc
Condensed consolidated statement of cash flows
for the year ended 31 December 2021
Year ended 31 December 2021 Year ended 31 December 2020
Audited Audited
€'000 €'000
Cash flows from operating activities
Profit/(loss) after tax for year 3,442 (10,358)
Adjustments for:
Depreciation 15 24
Impairment of exploration and evaluation assets - 272
Finance income (6,699) (361)
Finance expense 888 8,279
Share based payment charge 338 448
Foreign exchange (16) 21
Change in trade and other receivables (165) 175
Change in trade and other payables 227 (700)
Net cash outflow from operating activities (1,970) (2,200)
Cash flows from investing activities:
Interest received - 1
Acquisition of exploration and evaluation assets (1,492) (902)
Cash calls in respect of exploration and evaluation assets 262 57
Acquisition of property, plant and equipment (2) (1)
Net cash used in investing activities (1,232) (845)
Proceeds from issue of security instruments 2,974 4,836
Issue costs - (349)
Net cash from financing activities 2,974 4,487
Net (decrease)/increase in cash and cash equivalents (228) 1,442
Cash and cash equivalents at beginning of year 2,110 710
Effect of exchange rate fluctuations on cash and cash equivalents 41 (42)
Cash and cash equivalents at end of year 1,923 2,110
PROVIDENCE RESOURCES Plc
Note 1
Reporting entity
Providence Resources Plc ("the Company") is a company domiciled in Ireland.
The registered number of the Company is 268662 and the address of its
registered office is Paramount Court, Corrig Road, Sandyford Business Park,
Dublin 18, D18 R9C7.
Basis of preparation
The consolidated preliminary financial results announcement of the Company,
for the year ended 31 December 2021 comprises of the Company and its
subsidiaries (together referred to as the "Group").
The financial information included in this consolidated preliminary financial
results announcement has been extracted from the Group's Financial Statements
for the year ended 31 December 2021 and is prepared based on the accounting
policies set out therein, which are consistent with those applied in the prior
year with the exception of the effect of the new accounting standards listed
below. As permitted by European Union (EU) law and in accordance with AIM and
Euronext Growth Market rules, the Group Financial Statements have been
prepared in accordance with International Financial Reporting Standards
(IFRSs) and their interpretations issued by the International Accounting
Standards Board (IASB) as adopted by the EU.
The financial information prepared in accordance with IFRSs as adopted by the
EU included in this report does not include all the information and
disclosures required in the full statutory financial statements. The Group
Financial Statements will be filed with the Company's annual return in the
Companies Registration Office and circulated to shareholders in due course.
The information included has been derived from the Group Financial Statements
which were approved by the Board of Directors on 23 June 2022. The auditors
have reported on the financial statements for the year ended 31 December 2021
and their report was unqualified and contains a "material uncertainty related
to going concern" paragraph (see going concern note below for further
details). The financial information for the year ended 31 December 2020
represents an abbreviated version of the Group's statutory financial
statements on which an unqualified audit report was issued and which have been
filed with the Companies Registration Office. The financial information is
presented in Euro, rounded to the nearest thousand where applicable.
The preparation of the condensed consolidated preliminary financial
information requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. Actual results could differ materially from
these estimates. In preparing this financial information, the significant
judgements made by management in applying the Company's accounting policies
and the key sources of estimation uncertainty are the same as those that
applied to the consolidated financial statements as at and for the year ended
31 December 2020, except as noted below.
Changes in significant accounting policies
New and Amended Standards and Interpretations effective during 2021
New and amended standards and interpretations
The following new standards and amendments were adopted by the Group for the
first time in the current financial reporting period with no resulting impact
to the consolidated financial statements:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform - Phase 2.
PROVIDENCE RESOURCES Plc
Note 1 (continued)
New and amended standards and interpretations (continued)
• Amendments to IFRS 16, COVID-19 Related Rent Concessions beyond 30 June
2021;
• Amendments to IFRS 4 Insurance Contracts - deferral of effective date of
IFRS 9;
Forthcoming requirements
A number of new standards, amendments to standards and interpretations issued
are not yet effective and have not been applied in preparing these financial
statements. These new standards, amendments to standards and interpretations
are not expected to have a material impact on the Group's financial statements
as the Group has no transactions that would be affected by these new standards
and amendments.
The principal new standards, amendments to standards and interpretations are
as follows:
• Amendments to IAS 1 Classification of Liabilities as Current or
Non-current;
• Amendments to IFRS 17, Insurance contracts: Initial application of IFRS 17
and IFRS 9;
• Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of
Accounting Policies;
• Amendments to IAS 8, Definition of Accounting Estimates;
• Amendments to IAS 12, Deferred Tax related to Assets and Liabilities
arising from a single transaction;
• Amendments to IFRS 10 and IAS 28, Sale of contribution of Assets between
an investor and its Associate or Joint Venture.
New and Amended Standards and Interpretations Issued but not yet Effective or Early Adopted
A number of new standards and interpretations have been issued but are not yet
effective for the Group. These standards are either not expected to have a
material effect on the Consolidated Financial Statements or they are not
currently relevant for the Group.
Warrants
The warrants liability amounts to €0.460 million at 31 December 2021 (2020:
€6.713 million). The warrant liability is due to the warrants being issued
in GBP while the functional currency of the Parent Company was EUR.
The warrants were issued as part of the share placing in May 2020. There were
two sets of warrants attached to each share. The duration for the £0.03 was
one year and for the £0.09 was two years. The £0.03 warrants expired on 6
May 2021. At 31 December 2021, the warrants valuation amount to €0.46m and
represents management's best estimates of the liability for the £0.09
warrants. The key estimate in the valuation of warrants is the volatility rate
applied. The period of 18 months was used for the volatility calculation for
the £0.09 warrants which expired on 6 May 2022. The 4-month period for the
£0.09 warrants was determined by management as too short and would distort
the volatility calculation as it is a key component when calculating the fair
value using Black Scholes; see note 19. The fair value movement of the
warrants is recognised in the income statement as either finance income or
finance expense, depending on the movement.
Going concern
The Directors have prepared the financial statements on a going concern basis,
which assumes that Group and Company will continue in operational existence
for at least twelve months from the date of the approval of these financial
statements.
At 31 December 2021, the Group had net assets of €61.737m, including cash on
hand of €1.923m, having recorded a net cash outflow of €0.228m during the
year. Having no source of operating revenues, in June 2022, the Company raised
gross proceeds of $1.8 million (equivalent to approximately STG£1.5 million)
through the subscription for 45,312,316 Placing Securities and 51,686,693
Subscription Securities (each of which shall comprise one New Ordinary Share
and one STG1.5p Warrant) (note 12), demonstrating again the ongoing support of
shareholders. Together with existing resources, this additional funding is
sufficient to meet the anticipated working capital requirements of the Group
for at least the next 12 months.
PROVIDENCE RESOURCES Plc
Note 1 (continued)
Going concern (continued)
In April 2021, the Group applied for a Lease Undertaking for the Barryroe
Joint Venture, as the follow-on permit from the Standard Exploration Licence,
SEL 1/11, which expired in July 2021. The proposed work programme centres on
drilling an appraisal well, targeted for completion in 2023. The Directors
note that the Irish Government has stated that all existing licences will be
allowed to run their full life cycle. The Group has fulfilled all obligations
relating to SEL 1/11 and the Directors believe the Barryroe Joint Venture has
complied with all the requirements for Government approval of the Lease
Undertaking, which would be backdated to run for upto four years from July
2021. Notwithstanding the delay thus far in securing Government consent, the
Directors continue to expect that this next phase of the Barryroe Licence, and
the associated proposed work programme, will finally receive approval in the
coming months.
The work programme proposed under the Lease Undertaking, if granted, entails
significant capital expenditure by the Barryroe Joint Venture. Consequently,
prior to the letting of major commercial contracts for the appraisal well and
related studies, the Directors have considered the Group's options available
to fund its expenditure commitments, both current and contingent upon securing
the Lease Undertaking. In particular, upon confirmation of approval of the
Lease Undertaking, the Directors expect to raise substantial additional equity
funding to meet the Group's share of the related obligations.
The Directors have carefully considered the current financial position of the
Group and have prepared cash flow forecasts for the period to 30 June 2023,
being the 12-month period from the date of approval of these financial
statements. They note that the main risk factors in these forecasts are the
granting of the Barryroe Lease Undertaking on acceptable terms and conditions
and the completion of an appropriate further equity funding round during the
period. Based on their consideration of the Group's cash flow forecasts, and
the underlying assumptions, the Directors are satisfied that the Group will
have access to sufficient funds to cover its working capital and capital
expenditure expected over this 12-month period.
The Directors have considered the matters set out above and determined that
the outstanding Government consent to the Barryroe Lease Undertaking and the
requirement, contingent thereon, to secure additional funding to pursue the
related Barryroe appraisal work programme in the next 12 months, constitute
material uncertainties that may cast significant doubt upon the Group's and
Company's ability to continue as a going concern. Should the Lease Undertaking
not be approved, or appropriate additional funding not then be secured, the
Directors note that the Group and Company may be unable to realise its assets
and discharge its liabilities in the normal course of business.
Nevertheless, after making enquiries and considering the uncertainties
described above, the Directors have a reasonable expectation that the Group
and Company will have adequate resources to continue in operational existence
for the foreseeable future. The Directors expect that the Barryroe Lease
Undertaking will be approved and, noting that the Group and Company has
continued to have ongoing support from shareholders, that an appropriate
further fundraising will be successful. For these reasons, the Directors have
adopted the going concern basis in preparing these annual financial
statements, which do not include any adjustments that would be necessary if
this basis were inappropriate.
Operating segments
All exploration and evaluation assets held by the Group are located in the
Republic of Ireland and, accordingly, the Group has identified one reporting
segment, being:
Republic of Ireland exploration assets: oil and gas exploration assets in the
Republic of Ireland.
PROVIDENCE RESOURCES Plc
Note 2
Administration expenses
Year ended 31 December 2021 Year ended 31 December 2020
Audited Audited
€'000 €'000
Corporate, exploration and development expenses 2,385 2,142
Foreign exchange gain (16) 21
Total administration expenses for the year 2,369 2,163
Note 3
Finance Income
Year ended 31 December 2021 Year ended 31 December 2020
Audited Audited
€'000 €'000
Bank deposit interest income - 1
Gain in fair value of warrants (note 9) 5,643 -
Redetermination of decommissioning provision (note 7) 1,056 -
Foreign exchange in decommissioning provision (note 7) - 360
Total finance income recognised in income statement 6,699 361
Note 4
Finance Expense
Year ended 31 December 2021 Year ended 31 December 2020
Audited Audited
€'000 €'000
Unwind of discount on decommissioning provision (note 7) 593 565
Foreign exchange loss on decommissioning provision(note 7) 294 -
Interest on right to use asset 1 1
Issue costs associated with the warrants - 132
Loss in fair value of warrants (note 9) - 7,581
Total finance expense recognised in income statement 888 8,279
PROVIDENCE RESOURCES Plc
Note 5
Exploration and evaluation asset
€'000
Cost and net book value
At 1 January 2020 65,377
Additions 902
Cash call amounts received in year (57)
Impairment charge (272)
Foreign exchange translation (5,525)
At 31 December 2020 60,425
Additions 1,492
Cash call amounts received in year (262)
Decommissioning redetermination 287
Foreign exchange translation 5,041
At 31 December 2021 66,983
The exploration and evaluation asset balance at 31 December 2021 relates to
the Barryroe asset.
The directors assessed all activities ongoing within exploration and
evaluation assets and determined that no impairment charge (2020: €0.27
million charge) was required at 31 December 2021.
The directors recognise that the future realisation of the Barryroe asset is
dependent on the granting of the lease undertaking which is subject to
government approval, future successful appraisal activities and the subsequent
economic production of hydrocarbons.
Note 6
Share Capital and Share Premium
Number
('000) €'000
Authorised
Deferred shares of €0.011 each (a) at beginning of year 9,994,066 109,385
Deferred shares of €0.011 each (a) each at end of year 9,944,066 109,385
Ordinary shares of €0.001 each at beginning of year 1,800,000 1,800
Ordinary shares of €0.001 each at end of year 1,800,000 1,800
(a) The deferred shares do not entitle the shareholder to receive a
dividend or other distribution, do not entitle the shareholder to receive
notice of or vote at any general meeting of the Company, and do not entitle
the shareholder to any proceeds on a return of capital or winding up of the
Company.
PROVIDENCE RESOURCES Plc
Note 6
Share Capital and Share Premium (continued)
Share Share
Number capital premium
Issued 000's €'000 €'000
Deferred Shares of €0.011 each
At 31 December 2020 6,441,373 70,854 5,691
At 31 December 2021 6,441,373 70,854 5,691
Ordinary Shares of €0.001 each
At 31 December 2020 888,803 889 251,082
Shares issued during the year - - -
Warrants exercised in year 86,061 86 3,499
At 31 December 2021 (Ordinary shares of €0.001) 974,864 975 254,581
At 31 December 2021 (Total deferred and ordinary shares) 7,416,237 71,829 260,272
On 5 May 2020, the Company issued 177,973,004 ordinary shares as part of a
placing and subscription agreement which raised c.€3.1m before expenses.
Each security instrument comprised one ordinary share of €0.001, one £0.03
warrant and one £0.09 warrant.
On issuance, a fair value of €1.9m was attributed to the ordinary shares
(share capital/share premium outlined above) and €1.2m to the Warrant
instruments based on the effective share price at that date. In line with the
Group's accounting policies these Warrants are presented as financial
liabilities. The holder of each warrant could exercise its rights under the
instrument which allowed that holder to convert the warrant into one ordinary
share, with a par amount of €0.001, by payment of the exercise price of
£0.03 or £0.09, as applicable. The warrants are non-transferrable.
On 28 May 2020, the company issued 6,116,208 Ordinary shares through a
subscription agreement which raised approx. €0.2m. During 2020, 47,288,814
£0.03 warrants were exercised. The fair value of these exercised warrants was
€2.021m.
The share capital and share premium total increase of €5.7m in 2020
comprised:
· €1.9m on 5 May from the placing of shares;
· €0.2m on the 28 May 2020 from the additional subscription;
· €1.557m being cash received upon the exercise of warrants; and
· €2.021m being the fair value of the warrants exercised.
During 2021, there were 86,061,529 £0.03 warrants exercised which raised
approx. €2.974m. The remaining 44,622,661 £0.03 warrants expired on the 6
May 2021. No £0.09 warrants have been exercised and the £0.09 warrants
expired on 6 May 2022.
The fair value of the £0.03 warrants that were exercised was recalculated at
the time exercise. The fair value of 86,061,529 warrants of £0.03 exercised
was calculated as €0.610m. This fair value is added to the actual cash
raised of €2.974m to give a total increase in share capital and share
premium of €3.585m.
PROVIDENCE RESOURCES Plc
Note 7
Decommissioning provisions
2021 2020
€'000 €'000
At beginning of year 5,853 5,733
Unwinding of discount 593 565
Foreign exchange (gain)/loss 294 (360)
Redetermination of decommissioning provision (769)
Translation adjustment 85 (85)
At end of year 6,056 5,853
During 2021, the Board undertook a strategic review of Barryroe. The outcome
of this is that an appraisal well is planned to be drilled in 2023 preparatory
to a phased development, with first oil production expected by the end of 2026
subject to Ministerial approval.
The Group anticipates that a decommissioning programme for other licence areas
(since relinquished) will be undertaken at the same time as the Group's
Barryroe wells, subject to regulatory consent and approval. Accordingly, all
decommissioning is projected to take place in 2047.
The decommissioning provision is made up of a total of six wells. Five of the
wells are held in the Parent Company, Providence Resources Plc, making up
€4.633m of the decommissioning provision while the remaining well is held in
Exola DAC for which the decommissioning provision is €1.423m.
The decommissioning provision has been calculated assuming industry
established oilfield decommissioning techniques and technology at current
prices, based on external expert reports where available and is discounted at
1.3% (2020: 10%) per annum, reflecting the associated risk profile.
The Group undertook a review of the discount rate applied to the projected
costs to derive the net present value. The Board used the 20-year Irish
Government Bond rates of 1.30% as an appropriate discount rate. In relation to
cost inflation, experience over the last decade indicates that advances in
technology and operations in the decommissioning of wells, suggests that cost
inflation may reasonably be expected to be offset by gains in efficiency so
the net effective cost inflation rate used was zero.
As a result of the updated calculation, there was a net €0.769 million
adjustment to the decommissioning provision at the end of 2021. €1.056
million credit was adjusted through the Parent Company. The offset to this
figure was registered in the income statement as finance income. The remaining
sum of €0.287 million charge related to the Barryroe well and was
capitalised in the Exploration and Evaluation assets.
PROVIDENCE RESOURCES Plc
Note 8
Earnings per share
Earnings per share are calculated by dividing the loss attributable to equity
holders of the Company by the weighted average number of ordinary shares in
issue during the year.
Total Total
2021 2020
€'000 €'000
Profit/(loss) attributable to equity holders of the Company 3,442 (10,358)
The weighted average number of ordinary shares in issue 2021 2020
is calculated as follows:
In issue at beginning of year ('000s) 888,803 657,425
Adjustment for shares issued in year 58,520 130,519
Weighted average number of ordinary shares ('000s) 947,323 787,944
cent cent
Basic profit/(loss) per share (cent) 0.36 (1.31)
The weighted average number of ordinary shares
for diluted earnings per share calculated as follows:
Dilutive share options 39,683 37,850
Dilutive warrants 177,973 308,657
Basic weighted average number of shares in issue during
the year 947,323 787,944
Weighted average number of ordinary share 1,164,979 1,134,451
Diluted profit/(loss) per share (cent) 0.30 (0.91)
There is a difference between the basic profit per ordinary share and the
diluted profit per ordinary share for the current year. However, for the
prior year all potentially dilutive ordinary shares outstanding are
anti-dilutive in relation to continuing operations. There were 39,683,000
(2020: 37,850,000) anti-dilutive share options in issue at 31 December 2021.
There were 177,973,004 (2020: 308,657,194) anti-dilutive warrants.
PROVIDENCE RESOURCES Plc
Note 9
Share options and warrants
The Group operates employee share schemes as follows:
2009 Scheme
In 2009, the directors adopted a share option scheme which contains share
growth performance criteria. The option price is the market price
immediately preceding the date of grant. The "2009 scheme" operates as an
equity-settled share option scheme and the options are granted subject to the
following conditions:
(i) 50% of total options granted are exercisable after one year from
the date of grant provided that the market price of the Company's shares has
increased by a minimum of 25% and has maintained such increase over a period
of three months prior to the exercise of any option.
(ii) The remaining 50% of the total options granted are exercisable
after two years from the grant date provided the market price of the Company's
shares has increased by a minimum of 50% from date of grant and has maintained
such increase over a period of three months prior to the exercise of any
option.
At 31 December 2021, options over 3,850,000 (2020: 3,850,000) shares remained
outstanding at subscription prices ranging from €0.14 to €0.17, with a
weighted average price of €0.152 (2020: €0.152). These options expire at
varying dates up to June 2024, with none exercisable at year end.
2020 Scheme
In 2020, the directors adopted a share option scheme which contains certain
performance criteria. No options can be issued after 10 years of the scheme.
The option price is the market price immediately preceding the date of the
grant. The "2020 scheme" operates as an equity-settled share option scheme
and the options granted are subject to certain conditions. No option is
exercisable more than seven years after grant date and no option is
exercisable within one year of grant.
During 2021, 18,000,000 share options were granted under the 2020 Share
options scheme to directors.
The applicable criteria for the exercise of the options are;
(i) 33% of the total number of options granted are exercisable after one
year of grant.
(ii) 33% of the total number of options granted are exercisable after two
years of grant.
(iii) The remaining 33% of the total number of options granted are
exercisable after a further year has elapsed.
Grant Date 21 May 2021 18 August 2021
Number of options granted 9,000,000 9,000,000
Volatility 150% 98%
Time period 7 years 7 years
Dividend yield 0% 0%
Risk free interest rate 0% 0%
Exercise price €0.038 €0.046
PROVIDENCE RESOURCES Plc
Note 9
Share options and warrants (continued)
During the prior year, 36,500,000 share options were granted under the 2020
Share option scheme. Of that total, 31,500,000 options were granted to the
then directors and 5,000,000 options were granted to employees.
The applicable criteria for the exercise of the options are;
(i) 33% of the total number of options granted are exercisable after
one year of grant provided that the criteria agreed by the Remuneration
committee have been met.
(ii) 33% of the total number of options granted are exercisable after
two years of grant provided that the criteria agreed by the Remuneration
committee have been met.
(iii) The remaining 33% of the total number of options granted are
exercisable after a further year has elapsed provided that the criteria agreed
by the Remuneration committee have been met.
Grant Date 13 January 2020 6 April 2020
Number of options granted 15,000,000 21,500,000
Volatility 103% 108%
Time period 7 years 7 years
Dividend yield 0% 0%
Risk free interest rate (0.01%) (0.01%)
Exercise price £0.04 £0.03
At 31 December 2021, the closing share price was €0.0376 resulting in
9,500,000 options being exercisable.
Charge
The share-based payment charge for the year was €338,000 (2020: €448,000).
Warrants
On 5 May 2020, the Company raised €3.1m by the issue of security instruments
with each security instrument comprising one ordinary share, with a par amount
of €0.001, one £0.03 warrant (expires in May 2021) and one £0.09 warrant
(expires in May 2022). The fair value of the warrants was calculated using
Black Scholes model. The following key input assumptions were applied to the
initial valuation on issuance of these instruments:
£0.03 Warrants £0.09 Warrants
Number of warrants 177,973,004 177,973,004
Volatility 148% 148%
Time period 1 year 2 years
Dividend yield 0% 0%
Risk free interest rate (0.01%) (0.01%)
Exercise price £0.03 £0.09
Placing effective share price 0.01068 0.01068
Initial value of security 0.00299 0.00349
Fair value €531,444 €621,982
PROVIDENCE RESOURCES Plc
Note 9
Share options and warrants (continued)
The €3.1m raised before expenses, from previous and new shareholder
investors, for the security instruments in May 2020 was considered the
transaction price fair value. The split of this fair value on issuance of
these security instruments, based on a placing effective share price of
€0.01068, was €0.531m for the £0.03 Warrants, €0.622m for the £0.09
Warrants and €1.901m for the Ordinary Shares (split between share capital
and share premium account (note 6)).
During 2021, 86,061,529 of the £0.03 warrants were exercised. There were a
number of warrant transactions exercised in each of the months before they
expired on 6 May 2021. The key assumptions used in the calculation of their
fair value at the exercise date are included in the table below. The weighted
average closing price was used to reflect the number of transactions in each
month.
January 21 February 21 March 21 April 21 May 21
Number of warrants 287,372 1,666,666 1,000,000 65,975,822 17,131,669
Volatility 135% 135% 135% 206% 208%
Time period 0.30 year 0.18 year 0.10 year 0.016 year 0.003 year
Dividend yield 0% 0% 0% 0% 0%
Risk free interest rate (0.61%) (0.61%) (0.61%) (0.61%) (0.61%)
Exercise price £0.03 £0.03 £0.03 £0.03 £0.03
Weighted average closing
share price €0.075 €0.075 €0.054 €0.0392 €0.038
Fair value €12,685 €71,219 €23,419 €439,557 €62,804
The fair value of the warrants exercised during the year is recognised in the
movement of the warrant liability with a corresponding increase in share
premium.
On 31 December 2021, the £0.09 warrants were fair valued using appropriate
inputs including the closing share price on that day of €0.0376. The period
of 18 months has been used for the volatility calculation for the £0.09
warrants which expired on 6 May 2022. The 4-month period for the £0.09
warrants was too short and would distort the volatility calculation as it a
key component when calculating the fair value using Black Scholes. The fair
value movement being the difference between 31 December 2020 and 31 December
2021 valuation in the amount of €6.253m is recorded as finance income in the
Income statement. No £0.09 options were exercised and all have now expired.
Warrants
£0.03 Warrants £0.09 Warrants
Number of warrants 0 177,973,004
Volatility 0% 144%
Time period Expired 0.35 years
Dividend yield 0% 0%
Risk free interest rate 0% (0.071%)
Exercise price £0.00 £0.09
Closing share price 31 December 2021 €0.0376 €0.0376
Fair value as at 31 December 2021 - €460,271
PROVIDENCE RESOURCES Plc
Note 9
Share options and warrants (continued)
During 2020, 47,288,814 of the £0.03 warrants were exercised. There were a
number of warrant of transactions exercised in each of the months. The key
assumptions used in the calculation of their fair value at the exercise date
are included in the table below. The weighted average closing price was used
to reflect the number of transactions in each month.
September 20 October 20 December 20
Number of warrants 24,648,335 10,966,667 11,673,812
Volatility 125% 125% 125%
Time period 0.58 year 0.50 year 0.33 year
Dividend yield 0% 0% 0%
Risk free interest rate (0.6%) (0.6%) (0.6%)
Exercise price £0.3 £0.03 £0.03
Weighted average closing share price €0.07 €0.08 €0.06
Fair value €1,138,828 €557,901 €324,687
The fair value of the warrants exercised during the year is recognised as a
finance expense of €2.021m in the income statement with a corresponding
increase in share premium.
On 31 December 2020, the warrants were fair valued using appropriate inputs
including the closing share price on that day of €0.055. The period of 18
months has been used for the volatility calculation for the £0.09 warrants
which expired on 6 May 2022 and the £0.03 which expired on 6 May 2021. The
4-month period for the £0.03 warrants was too short and would distort the
volatility calculation as it a key component when calculating the fair value
using Black Scholes. The fair value movement being the difference between
initial valuation and 31 December 2020 valuation in the amount of €5.56m is
recorded as a finance expense in the Income statement.
£0.03 Warrants £0.09 Warrants
Number of warrants 130,684,190 177,973,004
Volatility 125% 125%
Time period .33 year 1.33 years
Dividend yield 0% 0%
Risk free interest rate (0.06%) (0.06%)
Exercise price £0.03 £0.09
Closing share price 31 December 2020 €0.055 €0.055
Fair value as at 31 December 2020 3,157,748 3,555,240
PROVIDENCE RESOURCES Plc
Note 9
Share options and warrants (continued)
The following table shows the fair value movement:
Number of £0.03 Number of £0.09
warrants warrants warrants warrants Total
€'000 €'000 €'000
Initial valuation 177,973,004 €531 177,973,004 €622 €1,153
September 20 Exercised 24,648,335 €1,139 - - €1,139
October 20 Exercised 10,966,667 €558 - - €558
December 20 Exercised 11,673,812 €324 - - €324
Exercised fair value 47,288,814 €2,021 - - €2,021
Fair value as at 130,684,190 €3,158 177,973,004 €3,555 €6,713
31 December 2020
Total 2020 fair value
loss recognised
in the income statement
(see note 4) €4,648 €2,933 €7,581
January 21 Exercised 287,372 €13 - - €13
February 21 Exercised 1,666,666 €71 - - €71
March 21 Exercised 1,000,000 €23 - - €23
April 21 Exercised 65,975,822 €440 - - €440
May 21 Exercised 17,131,669 €63 - - €63
Exercised fair value
movement recognised in
the income statement 86,061,529 €610 - - €610
Fair value as at 31
December 2021 - - 177,973,004 €460 €460
Total fair value gain
recognised in the income
statement for the period
to 31 December 2021 (€2,548) (€3,095) (€5,643)
PROVIDENCE RESOURCES Plc
Note 10
Related party transactions
The Group contracted NRG Well Management International Limited to carry out
technical studies relating to Barryroe in 2021. The value of the work
undertaken was €198,893 (2020: €14,305) and was procured on an arm's
length basis. The balance outstanding as at 31 December 2021 was €177,564.
Andrew Mackay who is a non-executive Director of Providence Resources Plc, is
Chairman and part owner of NRG.
AM O'Sullivan PR was engaged by the Group in 2021 to develop and coordinate a
stakeholder management and communication strategy to improve the understanding
of the Barryroe project. The amount paid under the contract in 2021 was
€27,972 (2020: €nil) procured on an arm's length basis. There was no
balance outstanding as at 31 December 2021.
Ann-Marie O'Sullivan, who is a non-executive Director of Providence Resources
Plc, is the owner of AM O'Sullivan PR Limited.
Note 11
Commitments
The Group has capital commitments of approximately €0.183 million in respect
of its share of costs of exploration and evaluation and appraisal activities
to be incurred in 2022 However and subject to the timing of the Barryroe Lease
Undertaking grant then the Group could have additional commitments of €1.3m
for 2022 which comprise two years of Lease Undertaking fees (backdated to July
2021).
Note 12
Post Balance Sheet Events
On 6 May 2022, the 177,973,004 remaining £0.09 warrants expired. The warrants
were issued as part of the fund raising in May 2020. No £0.09 warrants were
exercised.
In June 2022, the Company raised gross proceeds of $1.8 million (equivalent to
approximately STG£1.5 million) through the subscription for 45,312,316
Placing Securities and 51,686,693 Subscription Securities (each of which shall
comprise one New Ordinary Share and one STG1.5p Warrant).
The total of 96,999,009 New Ordinary Shares have been issued pursuant to the
Fundraising, representing less than 10 per cent of the Company's issued
Ordinary Share Capital. In addition 96,999,009 warrants ("the STG 1.5p
Warrants") will be issued to Placees and Subscribers. The allotment and issue
of the Warrants is subject to and conditional upon the passing of certain
resolutions in relation to the Warrants (the "Warrant Resolutions") at the AGM
by the requisite number of shareholders as required pursuant to the Companies
Act (the "Warrant Condition"). If the Warrant Condition is not satisfied, the
Warrants will not be issued to the Placees and Subscribers. The issue of the
Placing Shares and Subscription Shares is not conditional on the passing of
the Warrant Resolutions.
On issue, the Warrants will entitle holders to subscribe for one new Ordinary
Share for each Warrant held at an exercise price of STG£0.015 per Ordinary
Share at any time for a period of 12 months following the date of satisfaction
of the Warrant Condition.
There have been no other significant events since the balance sheet date which
would require disclosure in or amendment of these financial statements apart
from the above.
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